The Corporate Manslaughter and Corporate Homicide Act 2007 ('the Act') received Royal Assent in July this year, creating a new offence of corporate manslaughter and corporate homicide in Scotland. The legislation aims to create a more effective basis for liability where the management of an organisation and its activities results in death.

The offence, which is applicable to corporate bodies including partnerships and some public and government organisations, occurs when the acts or omissions of an organisation causes death, and amounts to the gross breach of a duty owed by the organisation to the deceased. This occurs when conduct falls "far below what can reasonably be expected...in the circumstances". The principal consideration will be whether there was a breach of health and safety provisions, the seriousness of the breach and the risk posed.

Significantly, the Act introduces the concept of "senior management failure" allowing the actions of management, the systems of work adopted and the 'safety culture' within an organisation to be considered when determining liability. Hence, instead of creating new duties of care, the Act makes compliance with current health and safety standards critical. Management must therefore adopt clear and effective health and safety procedures to avoid culpability.

The principal penalty under the Act is an unlimited fine. Other penalties include remedial orders, requiring measures to be adopted to improve health and safety, and publicity orders, which require the organisation to publish details of the offence and the level of fine.

The reputational damage resulting from a conviction under the Act could therefore be significant and the harm negative publicity poses to the share price of a company is likely to become a concern for shareholders. In this regard the Act aims to insure the combined impact of a fine and any associated order is far more penal than the implementation of proper health and safety procedures.

Scott Boyle is a partner specialising in corporate finance with UK law firm Shepherd and Wedderburn. Tel: 0141 566 8591